The lawsuit filed in Thurston County Superior Court by medical marijuana activists John Davis, Philip Dawdy, Ken Adams and others contends that the Liquor and Cannabis Board hasn’t used a merit-based system to award new licenses. Spencer WeinerTNS file, 2009

The lawsuit filed in Thurston County Superior Court by medical marijuana activists John Davis, Philip Dawdy, Ken Adams and others contends that the Liquor and Cannabis Board hasn’t used a merit-based system to award new licenses. Spencer WeinerTNS file, 2009

Medical pot shops sue state, call licensing process ‘a mess’

Several longtime Seattle medical-marijuana businesses filed a lawsuit on Friday against the state Liquor and Cannabis Board alleging regulators are not following their own rules in issuing a new round of licenses for retail stores.

At issue is the process of bringing medical businesses into the state’s licensed recreational retail system. The Legislature in 2015 gave the LCB authority to license new stores, with priority given to longtime medical players seen as good actors by following rules and paying taxes.

The lawsuit filed in Thurston County Superior Court by medical marijuana activists John Davis, Philip Dawdy, Ken Adams and others contends the LCB has not used a merit-based system to award new licenses.

Instead of licensing longtime operators, the lawsuit says, the LCB is giving licenses to businesses that did not exist months ago.

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“The entire process is a mess,” Davis said in a statement. “I am watching phantom entities gobble up scarce licenses that will put real people out of business.”

An LCB spokesman said agency officials don’t comment on lawsuits.

One underlying problem, according to Friday’s complaint, is a priority system the LCB created to license new applicants and meet the Legislature’s mandate to shut down unlicensed medical-marijuana operations by July.

State law gives top priority to applicants who applied for state recreational licenses before July 2014, who were operating or employed by collectives before 2013, had a business license and history of paying applicable state taxes and fees.

The lawsuit says applicants have “cobbled” together teams that combine former collective employees with nonmedical entrepreneurs. Called “Frankenstein” applicants, the cobbled groups should not get licensing priority over longtime collectives, the lawsuit says, but apparently are.

The entire process is a mess. I am watching phantom entities gobble up scarce licenses that will put real people out of business.

John Davis, medical marijuana activist

While many cobbled groups have merit, it is contrary to the Legislature’s intent to license them to the detriment of existing collectives, the lawsuit says.

Other complaints in the suit allege the state’s method for capping the number of retail licenses is flawed and that the LCB’s requirement that applicants have a zero tax balance, instead of a “history of paying all applicable state taxes and fees,” is unfair. Applicants on a payment plan with the state or appealing state charges should not be penalized, the lawsuit argues.

The lawsuit, by the Spencer Palace Law firm of Everett, seeks an order for the LCB to remedy the problem.

A similar lawsuit was filed Thursday by attorney Elizabeth Hallock on behalf of Seattle’s Choice Wellness.